Two executives at the Canadian unit of Texas-based Kinder Morgan are poised to cash in with $1.5 million bonuses after Ottawa offered to bailout their west coast oil pipeline system and expansion project, according to a new filing with the United States Securities and Exchange Commission.
Both Kinder Morgan Canada president Ian Anderson and David Safari, the vice president of the Trans Mountain Expansion Project, stand to benefit from the deal, according to the new filing posted on Friday. The bonuses would be paid provided that they remain in their positions over the next two years.
The office of Finance Minister Bill Morneau declined to say whether he was aware of the proposed bonuses, referring questions about salary issues to Kinder Morgan.
Trans Mountain declines to comment on $1.5 million bonuses for Ian Anderson and David Safari
The company defended the bonuses.
"The arrangements were reviewed and approved by the Kinder Morgan Canada board of directors and are consistent with industry practice for a project and transaction of this size," said Trans Mountain spokeswoman Ali Hounsell in an email to National Observer.
Anderson earned about $2.9 million during the second half of 2017 in salary and other benefits, according to company documents, The Narwhal reported on April 20. Safari earned $1.95 million over the same period, the B.C.-based publication reported.
"Each officer was awarded a retention bonus of C$1,500,000, which will be payable in equal parts on July 2019 and July 2020, provided that the applicable officer remains employed by KMCI through such date," said Kinder Morgan in new SEC filings.
The latest filing, released on Friday, explains that the company's board of directors approved the new bonuses one day before Morneau announced the deal to purchase Kinder Morgan's Canadian assets for $4.5 billion. This would also be one day before Prime Minister Justin Trudeau's cabinet approved the multibillion dollar deal that is expected to close by the end of the summer.
"On May 28, 2018, in connection with the Purchase Agreement, the Board approved awards of retention bonuses by KMCI to Ian Anderson and David Safari, each a named executive officer of the Company," said the filing. "Each officer was awarded a retention bonus of C$1,500,000, which will be payable in equal parts on July 2019 and July 2020, provided that the applicable officer remains employed by KMCI through such date."
Morneau defends $4.5 billion deal
Another section of the filing also shows that Ottawa's $4.5 billion bailout of Kinder Morgan may have saved companies operating in the Canadian oilsands about $700 million in losses that they would have been forced to absorb if the pipeline operator had abandoned its project. This would be their share of expenses to cover the existing construction expenses by Kinder Morgan, based on the agreements they signed to be shippers on the Trans Mountain expansion pipeline.
Morneau's office continued to defend the deal on Friday.
"As you know, we've entered into a commercial agreement with Kinder Morgan that allows for the summer construction season to proceed without delay, and protects up to 15,000 good, well-paying jobs for hard-working Canadians through construction – including 9,000 jobs in British Columbia," said Morneau's spokesman Dan Lauzon in an email to National Observer. "The agreement is in our national interest, and will bring significant benefits to Canadians."
Earlier this week, Natural Resources Minister Jim Carr also defended the agreement, telling the CBC's Early Edition in Vancouver that he thought the government got the best deal possible for Canadian taxpayers.
"There was a team of experts negotiating with Kinder Morgan for many, many weeks," Carr said, the CBC reported. "That team, before the final decision was made, had a very firm grip on the economics of the sale. That was done properly and with all of the safeguards that the Canadian people would want."
But it's not clear how much construction will actually take place this summer, or how much that would cost. The SEC filing by Kinder Morgan indicates that the company hasn't concluded its contract negotiations with construction companies, and that it needs to update its cost estimates for building the project.
The new U.S. filing also indicates that Trans Mountain has agreed to resume development activities on the expansion project "using commercial efforts including proceeding to firm up the construction contracts and prepare a revised cost estimate" for the project, while continuing to meet its conditions and apply for the required permits to proceed with construction.
The Trans Mountain expansion project has triggered fierce opposition in British Columbia from a wide range of people, including First Nations who say they were not adequately consulted about the project, communities concerned about spills, and environmentalists who have said the project would push Canada's climate change goals out of reach.
About 200 people have been arrested at the site of the project's terminal in Burnaby, B.C., where opponents have been attempting to interfere with the company's ongoing construction efforts.
Economist Robyn Allan, who has spent the past few years analyzing the Trans Mountain project, said that the Trudeau government is misrepresenting the business case for the pipeline. Trans Mountain's last estimated the project would cost about $7.4 billion, but Allan estimates that the construction costs alone would likely exceed $9 billion, not including the $4.5 billion purchase price for the assets.
Allan also questioned the claims from the government that its deal would create 15,000 jobs.
"How does this purchase create jobs? They don't even know the capital costs of this project, according to this agreement," said Allan, a former president of the Insurance Corporation of British Columbia, in an interview.
She also criticized the proposed bonuses for Anderson and Safari.
"It's a large amount of money and it's something that most people are going to be shocked about," Allan added.
Editor's note: This article was updated at 2:40 p.m. ET on June 2, 2018 with a new comment from Trans Mountain.